Installment Buying

By Mufti Ebrahim Desai
Posted: 6 Sha'ban 1423, 13 October 2002

Q.) As you know these days there are different means available to buy things on installments:

1. Banks financing schemes which are based normally on interest.

2. Different shops offer installment plans to buy things like Motorcycle, Electronic items etc.

3. Leasing (normally interest based)

For 1 & 3, these are not permissible (haram) as Interest is involved in it. I am confused about 2nd point i.e., installment plans because I heard it's permissible to buy things by this mean. Confusion point for me is, if you buy an item through installments its price is always higher than the actual one like a new motorcycle cost 70000/- but on installments its 90,000/- Is this the same we consider as interest or not? Please clarify about it in the light of Shariah. [Farrukh]

A.) If the credit price is fixed it will be regarded as the full amount; the cash price would be considered to contain a discount. Provided that one price is fixed for installment payments at the time of the transaction, the sale will be valid. And Allah Ta'ala Knows Best